East Palestine hopes to lure oil drilling

February 3, 2014

EAST PALESTINE - The village is working out details of a suggestion to offer land to oil and gas exploration companies in bulk, with some on council wary of the process while others believe it's a no-brainer.

Councilman Don Elzer suggested in December the village combine its municipal property with residential property to offer to companies to draw more interest and get a better deal.

The village cannot force anyone to offer their land for leasing and participation would be strictly voluntary.

The councilman came to this week's meeting with a press release prepared to announce the plan, but the release was not given to the Journal because some on council were concerned with some of the information it contained.

Specifically, Councilman Alan Cohen was concerned Elzer's estimates of revenue received through leasing were "making promises" to residents the village possibly "couldn't keep."

Elzer has estimated the village could earn up to $8 million in signing bonus money alone if it received $4,000 per acre for the three square acres that make up East Palestine, including vacant lots and alleys.

That money would be divided among the village and landowners who agree to lease their property, he said.

The village would receive money for its municipal property only and not residential property, as contracts would be awarded individually, he explained.

For example, the smallest lots in town are approximately 50-by-150 feet, and Elzer has said those property owners would receive $750 in signing bonus money.

Village Solicitor Dave Powers told Cohen he does not believe the village is making promises it can't keep and believes Elzer's suggestion is worthwhile.

He also said Elzer's estimate of $4,000 per acre was in line with other leases being offered in other areas of the county.

"It is not binding, it's just a way to gauge the interest of the community in participating," he said.

Elzer said residents interested in offering their land would sign a letter of intent, which the village would then present to interested companies showing what amount of land is available for leasing locally.

While wary of the process, Cohen has said the idea is worth pursuing, and reiterated companies are not interested in the land the village is offering on its own.

Village officials have offered the roughly 140 acres of municipal land to companies over the last few years and have yet to be offered a lucrative lease.

Elzer has argued that if more land is on the table companies will "bite."

Cohen said residents are not being asked to sign anything binding, and Powers later said the village would not be a "middle man" with regards to any negotiations for residential property.

"We would hope that we would be able to get an oil and gas company interested in leasing, but the leases themselves would be between individual land owners and the gas company ... we are not taking a percentage. We are not going to sit down on behalf of the residents and negotiate individual leases," Power said. "What we want to do is make it so there is an opportunity for residents to lease their ground."

Elzer said the village of Barnesville in Belmont County set up public locations last year for its residents to lease land to Antero Resources Appalachian Corp.

The village leased its municipal property prior to that and earned roughly $6 million for its 1,047 acres. The lease included a 20 percent royalty, according to news reports in that area.

Barnesville residents were offered leases similar to the one given to the village, and the municipality organized the public leasing sessions, which were held over six days last year at the middle school and library.

Councilman Fran Figley said if residents don't offer their land they will miss out, since companies will likely drill horizontally anyway.

Cohen then asked about forced pooling, and Powers said there is the possibility that if enough land is leased those who have not signed may be put into the position to sign later, through forced pooling.

Those who are put in that position do not earn signing bonus money, only money through anything recovered from their property, which could be nothing.

A company may force pool for a drilling unit in Ohio as long as there is a 90 percent voluntary minimum acreage already leased, according to the Ohio Division of Mineral Resources Management.

"Right now things are kind of slow in the leasing department so we are hoping to just generate some interest and move the game forward for small property owners, maybe by several years," Powers said.

Councilwoman Ellen Beagle had concerns similar to Cohen's, although like Cohen, she is not against moving forward with the process.

A resolution outlining the process will be presented at the next council meeting.